Stratasys Ltd. SSYS is set to report third-quarter 2015 results on Nov 4. Last quarter, the company posted a positive earnings surprise of 212.5%. Let's see how things are shaping up for this announcement.
Factors at Play
Stratasys reported better-than-expected second-quarter results. However, performance at its MakerBot business remained weak.
Furthermore, on Oct 22, 2015, Stratasys announced its preliminary results for the third quarter of fiscal 2015. The revenue forecast is expected to be in the range of $166–$168 million. Similarly, non-GAAP earnings per share are projected to be between ($0.03) to $0.02 per share. The Zacks Consensus Estimate for revenues and loss are pegged at $171 million and 15 cents per share, respectively.
Stratasys’ soft revenue guidance reflects unfavorable currency exchange rate and weak performance at its MakerBot business.
The company revealed that revenues from its MakerBot business have plunged 57% on a year-over-year basis in the second quarter mainly due to overall market weakness coupled with continuous weakness related to the restructuring of its business.
Additionally, some customers are delaying their purchases owing to the current economic conditions. In the 3D printer business, majority of customers have gravitated toward the lower-priced uPrint, which may affect the company’s margins in the to-be-reported quarter and beyond.
Earnings Whispers
Our proven model does not conclusively show that Stratasys is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Negative Zacks ESP: This is because the Most Accurate estimate is pegged at 18 cents while the Zacks Consensus Estimate is poised at 15 cents. This leads to an ESP of -20.00% for Stratasys.
Zacks Rank #3: Stratasys’ Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some other companies, which are worth considering, as our model shows that they have the right combination of these two elements:
CDW Corporation CDW, with an Earnings ESP of +2.63% and a Zacks Rank #2
CenturyLink, Inc. CTL, with an Earnings ESP of +1.45% and a Zacks Rank #2
CyberArk Software, Ltd. CYBR, with an Earnings ESP of +10.00% and a Zacks Rank #2
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